Lloyd’s of Lon­don pays out US $750m in claims from sum­mer of storms

The Star (St. Lucia) - Business Week - - FRONT PAGE - BY FT COR­RE­SPON­DENT

Lloyd’s of Lon­don said it had paid out al­most US $750m on claims from hur­ri­canes Harvey, Irma and Maria, which dev­as­tated parts of the Caribbean and the US in Au­gust and Septem­ber.

Lloyd’s of Lon­don said it had paid out al­most US $750m on claims from hur­ri­canes Harvey, Irma and Maria, which dev­as­tated parts of the Caribbean and the US in Au­gust and Septem­ber.

The Lon­don in­surance market is fac­ing about $4.5bn of pay­outs in to­tal from the three storms.

Jon Han­cock, performance di­rec­tor, said: “When you get three cat­a­strophic weather events as well as earthquakes in Mex­ico and flood­ing in Asia all hap­pen­ing so close to each other, it’s es­sen­tial to make sure the market’s claims re­sponse moves as quickly as pos­si­ble to help peo­ple re­build their lives.”

He added: “We have made ad­vance pay­ments on a range of rein­sur­ance pro­grammes for lo­cal in­sur­ers to make sure they have the funds to pay claims lo­cally — both in Texas and the Caribbean.”

But con­cerns are grow­ing about the im­pact that the pay­outs will have on the market. Last Thursday Stan­dard & Poor’s Global Rat­ings re­vised its out­look on Lloyd’s to neg­a­tive from sta­ble, al­though it left its A+ credit rat­ing in­tact.

“These losses are sig­nif­i­cant rel­a­tive to peers and Lloyd’s an­nual earn­ings, and em­pha­sise the market’s ex­po­sure to catas­tro­phe risk,” S&P said in a state­ment.

It added that the market could re­store its cap­i­tal po­si­tion af­ter the pay­outs, but there was still the chance of fur­ther sig­nif­i­cant losses and un­cer­tainty about the po­ten­tial for in­surance pre­mi­ums to rise be­cause of the storms.

Last Fri­day S&P said that it ex­pected the credit rat­ings of US prop­erty and ca­su­alty in­sur­ers to be “re­silient” af­ter the hur­ri­canes but it was not so con­fi­dent about the global rein­sur­ance in­dus­try. It said that the storms, to­gether with the Mex­i­can earth­quake: “will likely wipe out the in­dus­try’s an­nual earn­ings and ul­ti­mately be­come a cap­i­tal event for the global rein­sur­ance sec­tor.”

The wider im­pact of the losses on the in­dus­try is be­com­ing clearer as in­sur­ers have up­dated in­vestors on their ex­po­sure in re­cent weeks. This week Scor, the France­based rein­surer, put its ex­po­sure at €430m. An­a­lysts said the com­pany had man­aged to al­most halve its po­ten­tial losses be­cause of retro­ces­sion, which is the in­surance that rein­sur­ers buy.

In the US, AIG said it ex­pected a $3bn hit from the three hur­ri­canes, along with the earthquakes in Mex­ico.

It is not ex­pected to get pro­tec­tion from rein­sur­ance be­cause each event cost it less than $1.5bn, the level at which the cover kicks in.

An­a­lysts at Bar­clays said that the im­pact of the storms on the US prop­erty and ca­su­alty in­surance in­dus­try should be “man­age­able”. “Al­though [third quar­ter] US P&C in­dus­try un­der­writ­ing re­sults are ex­pected to be among the worst ever, it should re­sult in break-even US in­dus­try earn­ings for the year in­clud­ing the ben­e­fit of re­cur­ring in­vest­ment in­come,” they wrote last week.

Not ev­ery­one is so san­guine, how­ever. In a blog post, Do­minick Hoare, the chief un­der­writ­ing of­fi­cer of Mu­nich Re’s syn­di­cate at Lloyd’s, pre­dicted that “there will be a ma­te­rial num­ber of (re)in­surer fail­ures, and, in ad­di­tion, many (re)in­sur­ers will have to re­tract their un­der­writ­ing due to cap­i­tal con­straints”.

(source: Yamil Lage / AFP – Getty Im­ages)

The neigh­bour­hood of Co­ji­mar was de­stroyed by Hur­ri­cane Irma in Ha­vana, Cuba

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